ContractsProf Blog

Fight Over Historic Black School in Charlotte-Mecklenburg

In 2007, the Torrence-Lytle School in Huntersville, North Carolina was transferred to the Charlotte-Mecklenburg Historic Landmarks Commission (HLC).  The school (facade image below, and back view farther down), originally known as the Huntersville Colored High School, was built in 1937 and expanded in the 1950s to add classrooms for younger students.  The building has not been used as a public school since 1966.

In 2016, and again in 2019, Tyson Bates and Regina Bates entered into contracts with HLC for the purchase of the property.  According to Nick de la Canal, reporting for WFAE Radio in North Carolina, the couple wanted to restore the facilities and open them to underserved children in the area.  They were never able to secure the property, and in 2022,  they sued HLC and its members, alleging eight causes of action, including breach of contract and breach of the duty of good faith and fair dealing. 

A trial court dismissed many of the plaintiffs' claims, but the breach of contract and breach of the duty of good faith claims survived, as did claims for negligent maintenance of a historic property, conversion and unjust enrichment.  On HLC's appeal, the Court of Appeals of North Carolina in Bates v. Charlotte-Mecklenburg Historic Landmarks Commission upheld the trial court's dismissals of some claims but it also dismissed, on governmental immunity grounds  all remaining claims against HLC and the individual defendants, except for the breach of good faith and fair dealing.  

The court granted most of defendants' motion to dismiss HLC and the individual defendants in their official capacities based on governmental immunity. The plaintiffs failed to allege a waiver of such immunity.  However, the court concluded, in a matter of first impression in the North Carolina courts, that governmental immunity doctrine does not cover claims for the breach of the duty of good faith and fair dealing.  The government is presumed to waive immunity to breach of contract claims whenever it enters into a contract.  Because the duty of good faith and fair dealing is an implied term in any contract, immunity is presumptively waived whenever a government entity enters into a contract.

The court extended immunity protections to the individual defendants in their individual capacities, because plaintiffs failed to allege that any of the individual defendants acted outside the scope of their duties or acted with malice or corruption.  Such allegations are required, under North Carolina law, to overcome the presumption of immunity for official acts.  For the same reasons, defendants could not be liable in their individual capacities for negligence or unjust enrichment.  However, conversion is an intentional tort.  As to the individual plaintiffs, only the conversion claim and the claim of breach of the implied duty of good faith and fair dealing survived the motion to dismiss.

Defendants sought leave through a writ of certiorari to challenge the trial court's denial of their motion to dismiss plaintiffs' breach of contract and breach of the duty of good faith and fair dealing claims, presumably on grounds other than immunity.  The court rejected these challenges as impermissible interlocutory appeals.  In sum, plaintiffs’ case will proceed on their breach of contract and breach of the covenant of good faith and fair dealing claims against all defendants and on their claim of conversion against the individual defendants in their individual capacities.

Continued Incredulity Over Snyder v. United States

I blogged about this case after oral argument, and SCOTUS produced the predicted 6-3 party-line endorsement of public corruption.  The opinion by Justice Kavanaugh amply illustrates just how inept this Court is at recognizing corruption.

James E. Snyder was elected Mayor of Portage, Indiana in 2011.  In 2014, Mr. Snyder accepted a $13,000 check from a company, Great Lakes Peterbilt (Peterbilt).  Federal prosecutors concluded that this payment was an illegal gratuity, paid to reward Mr. Snyder for steering a $1.1 million garbage truck purchasing contract to the company.  Mr. Snyder contended that the payment was for consulting services.  A federal jury believed the government's version of events, and a District Court sentenced Mr. Snyder to 21 months in prison.  The Supreme Court took the case in order to determine whether the relevant federal statute, 18 U. S. C. §666(a)(1)(B) covers gratuities, paid as a reward, as well as bribes paid in advance of some benefit that the recipient, a government official, provides to the payor.

Justice Kavanaugh (right), writing for the majority, considers "text, statutory history, statutory structure, statutory punishments, federalism, and fair notice," and concludes that the statute applies only to bribes, not to gratuities.  Indiana law may very well prohibit Mr. Snyder's conduct, but he was never prosecuted under Indiana law.  Nothing to see here, folks.

Justice Kavanaugh does provide cogent reasons for a narrow reading of the statute.  Two of the six Circuit Courts to confront the issue also concluded that § 666 is only about bribery and not about acceptances of gratuities.  He could have just gone with text, statutory history, and statutory structure, and the opinion would have been okay.  Justice Gorsuch briefly concurred, arguing that the scope of the statute is unclear, and in such cases, the rule of lenity counsels forbearance of prosecution.  

Instead Justice Kavanaugh engages in a meandering discussion of what he calls fair notice.  He is concerned about the possible overbreadth of the statute and its use to punish innocuous gifts, such as $100 gift cards at Dunkin' or students taking their college professors out for Chipotle or buying them tickets to a sporting event.  

Here my incredulity kicks in.  First, of course, the problem is not in taking gifts but in accepting them as a gratuity for some wrongful purpose.  I'm not sure politicians should be accepting giftcards from businesses if there is any connection between the gift card and public affairs in over which the politician has influence or decision-making power.  But if they engaged in such conduct, it would be the government's burden to convince a jury that a politician engaged in an act of official corruption in exchange for a $100 gift card at Dunkin'.  All Mr. Snyder had to do was show that he did some actual work in exchange for his $13,000 gratuity.  As the dissent points out, he made no such showing.  

It would not be a wrongful act if all of the students in a particular course or section bought their professor a meal or some other gift, so long as there were no connection between the gift and the grade.  

But I don't accept gifts from individual students.  First, I am comfortably situated, and my students are students. I would not want to contribute to a culture in which students think it appropriate to transfer wealth or resources upwards. I wouldn't want students to think that there were some expectation that they buy gifts for their professors.  I make an exception when student organizations give me small gifts for participating as a panelist or moderator for their events.  I make this exception as a cultural accommodation because they give the same gifts to all faculty members or outside speakers who participate.  I wish they wouldn't give me the gifts, but it would be awkward and churlish were I to reject the gifts that the students selected for me and which my colleagues accept.  However, I usually re-gift these things because otherwise I will forget about them, and they will collect dust in my office until I re-discover them years later.

Perhaps I would feel differently about these things if, like Justice Kavanaugh, I had attended elite private schools all my life in which many of my peers were far better off financially than their teachers.  But I think that says more about the lack of socio-economic diversity on the Court than it does about the ethics of the situation.

This isn't hard. I am well-compensated, and my power relations with my students are asymmetrical.  Students can't afford to buy me gifts, and I can't afford the appearance of impropriety that would arise should I accept their gifts.  

Not for nothing, on the subject of fair notice, it seems worth pointing out that Justice Kavanaugh joined the majority opinion in Campos-Chaves v. Goya, an immigration case decided less than two weeks before Snyder.  The issue in that case was whether immigrants can be ordered removed from the United States in absentia when they were not provided with the statutorily required "notice to appear."  That case actually was actually about notice and the stakes were higher than in Snyder.  After all, is it even plausible to think that Snyder, whose conduct could have been punished under state law, took a gratuity because he thought the federal statute only covered quid pro quo graft?  But in Campos-Chayes, Justice Kavanaugh agreed with the Majority that a later "notice of hearing" sufficed, even though the latter was to be provided only as a supplement to the required "notice to appear" in case of change or postponement in the time or place of removal proceedings. So, forgive me for thinking that Justice Kavaugh's commitment to the principle of notice is selective.

In any case, Justice Jackson, writing for the three dissenting Justices, has the better textualist reading of the statute, which punishes corruption, whether the improper payments involve quid pro quo influencing or post hoc rewards.  Her reading of the statutory history and the relationship of the statutory language at issue to other federal statutes covers material in depth where the Majority opinion barely scratches the surface.

Justice Kavanaugh expresses concerns about federalism, but Congress addressed those concerns when it passed the statute.  Yes, states are expected to police their own corrupt politicians.  However, when state entities accept federal funds, Congress  recognized a need (evident from this very case) for a federal supplement to state anti-corruption measures.  

Justice Kavanaugh worries about where to draw the line between corrupt and innocent gratuities.  That, Justice Jackson responds, is a question for another day, because Mr. Snyder is not arguing that what he did was innocent. He argues that the federal statute does not reach his conduct, even if it was corrupt.  Justice Jackson then proceeds to illustrate the statutory guardrails already in place to address the danger about which Justice Kavanaugh worries.  Nobody is going to jail for accepting a gift card, unless they do so "corruptly." Prosecutors, courts, and juries do pretty well distinguishing corrupt from innocent gifts. 

Finally, Justice Kavanaugh cites to evidence that bribery is a much more serious crime than taking gratuities corruptly.  He may be right that courts and statutory schemes make it so, but Justice Jackson points out that the two forms of corruption can be quite similar.  In this case, Mr. Snyder apparently shepherded a contract to Peterbilt and then showed up at their offices demanding a $15,000 payment because he needed money.  He got $13,000.  He characterized that payment as a consulting fee, but he also called it other things.  Peterbilt said that he never provided any services to them.  A jury likely concluded that Mr. Snyder was lying.  How is what he did any better than demanding the payment up front?  Should the law care whether I demand that you pay me $13,000 in order to steer a contract your way or demand that you pay me $13,000 once I have successfully steered a contract your way?

So, bottom line;  As a matter of federal law, it is not a crime for a state politician to accept after-the-fact gratuities in exchange for political favors.  In related news, as a matter of federal law, states and localities can make it is a crime to sleep in public.

Oklahoma Supreme Court Finds Contract for Catholic Charter School Violates the Establishment Clause

I mean, is anybody really surprised? This case was brought by Oklahoma's Attorney General, Gentner Drummond (right), a conservative Republican, who believes in the rule of law.  That quality has caused a series of clashes between the Attorney General and the more committed cultural warriors in his party. 

In this case, Oklahoma's Virtual Charter School Board (the Board) has exclusive authority to form virtual schools. In October, 2023, the Board voted 3-2 to approve a charter contract with St. Isidore, a charter school formed by the Catholic Archdiocese of Oklahoma City and Catholic Diocese of Tulsa. St. Isidore describes itself as an instrument of the Catholic Church committed to the Church's evangelizing mission.

The contract entered into between the Board and St. Isidore departed in key ways from the standard contract that the Board entered into with other charter schools.  While a typical  charter school must warrant that it is not affiliated with a sectarian school or religious institution, the contract with St. Isidore states that St. Isidore is affiliated with a sectarian school or religious institution.  Other charter schools have to be non-sectarian.  St. Isidore's contract specifically recognizes its right to freely exercise its religious beliefs and practices consistent with its religious protections.

On June 25th, in Drummond v. Oklahoma Statewide Virtual Charter School Board, by a vote of 7-1, with one Justice recused, Oklahoma's Supreme Court found that the Board's plan to allow for a publicly-funded Catholic charter school violates Oklahoma's constitution.  Six Justices also found that the contract violated the federal Constitution's Establishment Clause.  

The Supreme Court first concluded that the Board's contract with St. Isidore violates Article II, Section 5 of the Oklahoma Constitution, which reads:

No public money or property shall ever be appropriated, applied, donated, or used, directly or indirectly, for the use, benefit, or support of any sect, church, denomination, or system of religion, or for the use, benefit, or support of any priest, preacher, minister, or other religious teacher or dignitary, or sectarian institution as such.

That seems pretty clear, and Oklahoma courts have repeatedly construed this provision as prohibiting state funding for sectarian schools.  Consistent with the state constitution, the Act allowing for the creation of charter schools also requires that they be non-sectarian.

The Supreme Court next finds that St. Isidore is a state actor because of its reliance on state funding.  I'm not sure why this holding is even necessary to the outcome of the case, as the suit is brought in mandamus against the Board.  St. Isidore intervened.  The point of the case is that the Board should be enjoined from contracting with St. Isidore.  I suspect that finding St. Isidore to be a state actor is relevant to the Court's Free Exercise discussion, which I summarize in the next paragraph.

Finally, the Court turns its attention to the U.S. Constitution.  It first finds that the contract with St. Isidore also fails under the U.S. Constitution's Establishment Clause.  It next finds no violation of the Free Exercise Clause, notwithstanding the recent trilogy of SCOTUS cases allowing for public funding to flow to private sectarian schools for certain purposes.  The difference here is that St. Isidore would be a public school.

The ability to admit that one is wrong about the law has been excised from the DNA of many Republican politicians.  And so, Oklahoma's Superintendent of Schools, Ryan Walters, previously discussed on this blog here and here and here, without the benefit of any legal training, doubles down on his commitment to state-funded religious eduction, writing on Twitter:

It’s my firm belief that once again, the Oklahoma Supreme Court got it wrong. The words ‘separation of church and state’ do not appear in our Constitution, and it is outrageous that the Oklahoma Supreme Court misunderstood key cases involving the First Amendment and sanctioned discrimination against Christians based solely on their faith.

Mr. Walters cites to the lone dissenting Justice (whose opinion can be found here), who found that because St. Isidore is not a state actor, denying it the opportunity to run a virtual charter school violates the U.S. Constitution's Free Exercise clause.  Because the dissent finds that St. Isidore is not a state actor, the relationship between the Board and the school is purely contractual, and there is nothing unconstitutional about the state contracting with sectarian entities.  Moreover, following on recent SCOTUS cases allowing state funds to flow to sectarian schools, the dissenting Justice finds that the Majority's order that the Board rescind its contract with St. Isidore violates the Free Exercise Clause.

This is a cutting-edge argument and an opportunity to petition SCOTUS for review.  SCOTUS has gone quite far in eliminating the "play in the joints" that once characterized its understanding of the First Amendment's religion clauses.  It used to be that states could allow funds to flow to sectarian educational institutions, either to be used for non-sectarian purposes or indirectly by allowing students or parents to direct state fellowships or education vouchers to the schools of their choice.  Recently, SCOTUS has held that where public education funds are available to private non-sectarian schools, they also must be available to private sectarian schools. Will SCOTUS be willing to take the next step and allow for the creation of public sectarian schools?  Stay tuned.

Immigrants Can Sue Department of Homeland Security for Breach of Contract

As alleged in the complaint, the Department of Homeland Security (DHS) offered classes to unsuspecting immigrants at the "University of Farmington."  Members of the proposed plaintiff class paid thousands of dollars, but the University of Farmington, notwithstanding its very real-looking logo (left), was a ruse, set up to target fraud involving student visas. Once the government sting operation was exposed as a scam, plaintiffs allege they were offered neither the education for which they had paid nor a refund.  The named plaintiff paid $12,500 in tuition for courses that purportedly would lead to masters degree in information technology. 

They sued in the U.S. Court of Federal Claims, alleging breach of contract and breach of the duty of good faith and fair dealing.  That court dismissed for lack of subject-matter jurisdiction under the Tucker Act. The government claimed to be acting in its sovereign capacity and had not consented to suit.

In Ravi v. United States, the Federal Circuit reversed. The Federal Circuit diverged from the Court of Federal Claims in their understanding of a 1981 precedent, Kania v. United States, 650 F.2d 264 (Ct. Cl. 1981).  In fact, the Federal Circuit generally eschews the locution "sovereign capacity doctrine," relied on by the government at the Court of Federal Claims, finding the phrase confusing given that the government always acts in a sovereign capacity.  Kania is readily distinguishable -- it was about a government promise to a prospective witness in the context of a criminal proceeding.  The promise seemed to be that in exchange for testimony in proceeding A, the witness would not be prosecuted in proceeding B. Mr. Ravi's case lacked the criminal element as well as an unrelated case.  It was a straightforward promise from the government to provide educational services in exchange for payment.

Plaintiffs still have many barriers to overcome, and the case is remanded for further proceedings. Still, the case is important because it goes to great lengths to clarify the narrowness of the Kania precedent.  

Hat tip to Carrie Rosenbaum (right), who teaches both contract and immigration law, for sharing the case with me, and hats off to Anna Nathanson and Amy Norris for their win on the case.

Update: Forever War Means Forever Detention Without Trial

Last week, in a fit of irrational exuberance, I reported on a plea deal to resolve the cases against three of the architects of the 9/11 attacks on the United States.  That plea deal has now been scuppered through the usual combination of thirst for retribution, political posturing on the one hand, and lack of political will on the other.  In short, as Carol Rosenberg and Eric Schmitt reported in The New York Times yesterday, under pressure from relatives of the dead and the same knuckleheads who prevented the overdue closure of the Guantanamo detention center during the Obama administration, Defense Secretary Lloyd J. Austin, III cancelled the plea deals.  Families of victims who supported the deal suffered "emotional whiplash."

Millions of people who were  alive that day feel some special connection to the events of 9/11.  Mine is that I worked in the World Trade Center and watched my office building burn that morning from the street.  I made it home in time to watch that building collapse on television. I reflected on that experience here. The men responsible for that catastrophe need to have their guilt adjudicated in a court of law which can be a context for fact-finding and some sort of ending to our national ordeal. 

Because the George W. Bush administration engaged in systematic violations of the laws of armed conflict in the form of "enhanced interrogation techniques" universally denounced as torture and cruel, inhuman and degrading treatment, it will not be possible to have a fully satisfying adjudication of the perpetrators' guilt.  One of the five defendants is now unfit to stand trial, likely because the conditions of his detention rendered him so. Evidence gathered against the others may not be admissible because it was produced under conditions that render it of dubious reliability as a true accounting of the facts.

The plea deals were likely the only path forward towards some sort of final reckoning with these mass murderers.  That path is now foreclosed and the national shame of indefinite detention without adjudication of guilt will continue.  Inhumane treatment of the detainees will not bring back the dead.  It just heaps on top of a human tragedy a national disgrace which also provides fodder for the sort of hatred that fueled the attacks whose perpetrators, it seems, will never be held to account.

Contracts (Plea Deals) May Finally Resolve Some of the 9/11 Cases

Seems fitting to ease in to blogging again with some breaking news, even if it is not your typical contracts law fare.  More like Lawfare fare.

Back in May, I suggested that contracts, in the form of plea deals, were the best way to finally end the national shame of the detentions at Guantanamo Bay and the travesty of justice that ought to bring resolution to the cases against the people responsible for the attacks on the United States on September 11, 2001.  Now, Carol Rosenberg (right), the last reporter standing in Gitmo, brings us news in The New York Times that some of the 9/11 defendants have entered into plea deals. 

Khalid Shaikh Mohammed (KSM), Walid bin Attash, and Mustafa al-Hawsawi, who have been in U.S. custody since 2003, agreed to plead guilty to the murder of 2.976 people in exchange for a promise that they will be spared the death penalty.  They were supposed to stand trial in the military tribunals set up at Guantanamo Bay.  The defendants had been held there since 2006, but their trial has been mired in pretrial proceedings for ten years.  It was unclear whether they were ever going to be tried.  We know, for example, that KSM was waterboarded 183 times, and Carol Rosenberg suggests the possibility that the military judge might throw out their confessions, which would have been a key piece of evidence.  

As expected, relatives of some of the defendants' victims are upset that the death penalty will be taken off the table.  Others are relieved that there will be some resolution.  While there will not be a trial, there will be hearing, which will provide an opportunity for the victims' families and the public at large to get all of the information they might want to learn from the perpetrators. KSM (left) had previously bragged about having been the "mastermind" behind 9/11.  Unless he has changed his ways, we can expect that he will be happy to have a forum in which to explain his thought processes and the techniques he used to perpetrate mass murder.  It seems unlikely that he will have much to add to what he has already told his interrogators.  We will also learn from the defendants about their treatment while in custody.  What we hear will be ugly but again it seems unlikely that people who have been following the story of US treatment of detainees in the war on terror will be surprised by what they hear.  But who knows? Some of my students were probably in kindergarten when we learned about crimes perpetrated by Americans against detainees at the Abu Ghraib prison.  The hearing may revive interest and educate the public about this chapter of our recent history.

There were originally five defendants in the case.  One has been found unfit to stand trial due to mental illness.  A fifth, Ammar al Baluchi, might have to stand trial alone.  Carol Rosenberg reports that he conditioned his agreement to a plea on a demand that the U.S. set up a civilian-run torture treatment facility for the defendants in prison.  The government may not have been willing to commit to that, but perhaps the government has more leverage now that Mr. Baluchi stands alone.

This may be a farewell gift from the Biden administration.  These talks have been going on for over two years.  The Biden administration originally would not accept the defendants' terms.  Now that President Biden is not seeking a second term, perhaps he feels emboldened to shut down as much of Gitmo as he can so that future administrations will not have to deal with the continued embarrassment of  the indefinite detention of mass murderers who cannot be tried because the U.S. found compliance with legal norms inconvenient and thus tainted all of the evidence that might have been marshaled so that they could be convicted of their crimes. 

Politicians Can Do Quid Pro Quo Deals, Can Naval Officers?

Last term, SCOTUS decided two cases involving political corruption. In Ciminelli v. United States, the Court rejected New York's right of control theory as a tool in fighting corruption in government bid practices, as we discussed here and here. In Percoco v. United States, the Court reversed and remanded a conviction for violation of the federal "honest services" statute because jury instructions in the case were too vague. This builds on a line of cases going back to the Bridgegate case in which SCOTUS has made it increasingly difficult to prosecute political corruption.

In April, SCOTUS again indicated its willingness to make it difficult to prosecute politicians who receive kickbacks.  Snyder v. U.S. is about a former mayor of Portage, Indiana who was convicted in a kickback scheme.  He was found to have rigged a bid to favor a particular company and then to have approached that company demanding a payment of $15,000.  He received $13,000, which was characterized as a consulting fee for services yet to be rendered to the company.  In oral argument, the court seemed poised to overturn the conviction.  There was a lot of discussion in the oral arguments about the difference between a gratuity and a bribe, and the Justices seemed very concerned that honest politicians would be accused of bribery just for accepting a $100 Starbucks gift card.

Really?  I wouldn't accept a $100 Starbucks gift card from a student.  Why would a politician accept a $100 Starbucks gift card from a constituent to whom he is steering a contract if not as a bribe?  There might be nothing nefarious going on, but that is a matter of determining intent, a feat that is not beyond the capabilities of courts. It's just weird that the Justices have a hard time recognizing corruption when it's staring them in the face.  It's almost as if one of them had  accepted gifts that raised questions about their ability to remain neutral when the interests of the gift-giver are implicated in pending matters.

Last week's New York Times brings a story from Michael Levenson about the arrest of a retired naval officer based on allegations that seem quite similar to those in Snyder.  According to the Times, Robert Burke, once the second highest-ranking officer in the Navy, steered a government contract worth hundreds of millions of dollars to a company in exchange for a position with that company that guaranteed him a salary of $500,000 plus 100,000 stock options.  If the transaction in Snyder is held to be a gratuity rather than a bribe, this seems more gratuity than bribe.  Admiral Burke and his alleged co-conspirators have nonetheless been charged with bribery and conspiracy to commit bribery.  If the arrest leads to a conviction, it will be interesting to see if SCOTUS keeps up its string of standing up for officials accused of corruption. 

Taxpayers of Oklahoma Pay for a PR Firm to Promote Its State Superintendant of Schools

Corruption in Oklahoma is probably no worse than corruption in other states, but it just seems like it is both more petty and more shameless.

There's the Epic schools scandal. This was the state's first virtual charter school, and its founders syphoned off millions of taxpayer dollars for their own private use.  Meanwhile, between 2014 and 2020, the principals donated $500,000 to the campaigns of individual Oklahoma politicians and $2 million to various political action committees. The fraud investigation began in 2014.  The principals were charged in 2022 with racketeering, embezzlement, obtaining money by false pretense, conspiracy to commit a felony, violation of the Computer Crimes Act, submitting false documents to the state, and unlawful proceeds.  Who knows if the public will ever disgorge their ill-gotten gains or if they will ever serve time for their crimes. 

Then there's the Swadley's Foggy Bottom Kitchen scandal, which we summarized here.  In short, the state gave a local restaurant chain an exclusive license to provide food service in Oklahoma's state parks. The restaurant won the opportunity through a process in which it was the only bidder and then it overcharged the state for management fees.

The latest is a chapter from the hijinks and shenanigans of the State Superintendent of Schools, Ryan Walters (right), some of which were recounted here and here.  Last week, Jennifer Palmer, writing for The Oklahoman reported that a Republican lawmaker is trying to introduce limits on the state's 2025 budget to prohibit funds from being used to pay for Mr. Walter's  national publicity contract with Washington, D.C.-based Vought Strategies.

The contract potentially pays hundreds of thousands of dollars to the PR firm.  Mr. Walters claims that the purpose of the contract is to help recruit teachers.  Critics contend that the purpose of the contract is really to promote Mr. Walters' career on a national level.  None of the advertising spots thus far produced relate to teacher recruitment.  Rather, according to The Oklahoman, "Vought Strategies pitched interviews about fentanyl and the southern border, drag queens in the classroom, teacher unions, library books and [Mr. Walters'] appointment of Chaya Raichik, the far-right social media influencer behind Libs of TikTok, to a library advisory committee."

Despite clear political ties between Mr. Walters and the agency, inappropriate communications with the agency during a nominally competitive bid process, and questions about the agency's qualifications for a government contract under Oklahoma law, the contract remains in force.  If the Epic scandal is any indication, investigations will be on-going, and indictments will be handed down somewhere around 2035.  Meanwhile, if Mr. Walters really wants to attract teachers to Oklahoma, maybe he should stop trying to revoke their licenses for giving students access to books.

Teachers Bring Breach of Contract Suit Against the Oklahoma Department of Education

Keeping with this week's theme of Oklahoma news, we have a day in the life of the Oklahoma State Department of Eduction (OSDE) under the leadership of Ryan Walters (right). Mr. Walters is the State Superintendent of Schools.  I have never before known who the superintendent of schools was for the state in which I lived, but Mr. Walters manages to grab headlines almost every day.  The headlines are not about how much Oklahoma schools have improved or about the successes those schools have had in recruiting new teachers.  Rather, they tend to be about banning books, shutting down D.E.I. programs, partnering with providers of conservative educational materials, losing employees, including the entire legal team, and difficulties in accounting for federal funds allocated to Oklahoma.

Two teachers are suing Mr. Walters.  The two teachers allege that they signed a contract in November, 2023, in exchange for a $50,000 signing bonus.  In January 2024, the OSDE demanded repayment of the bonus, and according to the complaint in Bojorquez v. State of Oklahoma, Mr. Walters claimed that the only reason they had been paid the bonuses was that they lied on their applications.  As a result of that statement, plaintiffs are suing not just for breach of contract but also for defamation.  

Stay tuned.

Implied Contracts and Good Faith in Norman, Oklahoma

Oklahoma City University School of Law 1L Lino Sengkhamvilay (right) shared this story with me.  Thanks, Lino!

In 2023, voters in the city of Norman rejected a long-term agreement between the city and the utility company, OG&E. The matter was on the ballot again in 2024, and it was defeated by 33 votes, as Jonathan Greco reports for KOCO News. Those who voted no apparently objected to the 25-year term of the agreement. Why couldn't the city enter into a five-year agreement with OG&E, so that it would have some leverage that it could exercise regularly? 

According to the reporting, Oklahoma requires municipalities to have agreements with power companies. So what now?

OG&E issued the following statement:

We are disappointed in the election outcome. Without a franchise agreement, OG&E and the city of Norman will continue to operate under an implied contract. Over the last five years OG&E has worked in good faith with the city, investing tens of millions of dollars improving reliability in the absence of a franchise agreement. Unfortunately, that good faith was not reciprocated. We will evaluate the long-term status of other agreements or projects underway with the city. OG&E has served Norman for more than 100 years and remains committed to our customers. We will continue to provide the electricity they need to power their homes and businesses.

So many interesting questions! 

First, when the legislature requires that municipalities and utilities be governed by an "agreement," did they have an implied contract in mind? Second, what are the terms of the implied contract and what limits does it place on OG&E's discretion to "evaluate the status of other agreements or projects underway with the city." Finally, who is OG&E accusing of not reciprocating its good faith? The city? How did the city violate its good faith obligations? The city put the contract on the ballot, as it presumably was required to do, and the mayor advocated for its approval. 

Is a monopoly utility accusing the voters who rejected a 25-year agreement of acting in bad faith. If so, that is wonderfully on brand. For those customers, this is a 25-year rolling contract of adhesion. What? You don't want to be bound for 25 years by a contract that you had no role in negotiating and cannot change, under which your utility bills may double or triple or quadruple while you have no alternative source of energy to heat or cool your home? How dare you!

Solar Array Nestled in Agricultural Fields

People of Norman: get thee some solar panels or geothermal!

Take the Money and Run, Pass, or Kick

Recently, Sid DeLong wowed us with an interesting perspective on the case of Danish performance artist Jens Haaning.  As readers of the blog well know, Haaning was commissioned to produce artwork incorporating $70,000 in Danish currency that the commissioning museum advanced to him for incorporation into the work.  Hanning never provided the work; instead, he delivered two blank canvases entitled Take the Money and Run.  

No biggy, Sid pointed out.  People get paid for doing nothing all the time.  Farmers get paid not to plant crops when the government is trying to control against overproduction.  Young William Story was entitled to collect from his Uncle William for successfully abstaining from certain corrupt behaviors before turning twenty-one.

Image by Ethridgem, via Wikimedia Commons

But if you really want to get paid the big bucks for doing nothing, I recommend coaching.  As I learned from Bobby Chesney and Steve Vladeck on their excellent, most recent, edition of the National Security Law Podcast, Texas A & M University is paying Jimbo Fisher (right) $75 million for not coaching its football team between now and 2031.  

Doug Lederman provides some details in Inside Higher Education.  According to the story, Mr. Fisher's contract was renewed in 2021 for ten years, and the contract was guaranteed, which meant that he would be paid whether or not he continued as coach.  You might be wondering how the taxpayers of Texas feel about having their money being used in a Bobby Bonilla style boondoggle.  The answer is probably that they are fine with it.  What's government for if not for building college football programs?  But just in case Texas taxpayers have other priorities, the university stresses that the $75 million will not come out of the university's regular budget but from "donor funds."

This strikes me as a relatively transparent shell game.  That $75 million in donor funds that will be going into Mr. Fisher's pocket are $75 million that the university might use for other, presumably sports-related, purposes.  And if the university cannot raise more private donor funds to attract its next football coach, or football stadium, or training facility, or whatever else it needs, the money to cover these new costs will indeed come from university funds that might have been used for, I don't know, educational purposes?

Last I checked, the Texas A &M football team is not ranked in either the AP nor the Coaches poll, nor did they have any votes in either poll, meaning that nobody polled thought that they were a top 25 team.  CBS Sports ranks them at 37.  Meanwhile, Texas A & M's law school is ranked 29th.  By my math, that ranking should entitle the law school's Dean to a guaranteed ten-year contract worth at least $85 million, and some portion of that money ought to go to the Blog, given that the Blog was founded by Texas A & M law faculty member Frank Snyder (left), and Texas A & M faculty member Mark Edwin Burge (right) continues to serve as a contributing editor.  Even a million or two would go a long way towards meeting the Blog's pressing fiscal needs.  I'm not asking for much.

One might think that Mr. Fisher will not in the end actually collect his $75 million from Texas A & M or its donors, because of the duty to mitigate.    But we've been down this path before on the blog, and I think we discovered that coaches who depart with guaranteed contracts do not have a duty to mitigate.  Mr. Fisher is perfectly free to move on to his next gig, command another Brobdingnagian salary, and continue to collect his spoils from Texas A & M.  In our world of the parable of his talents, this is righteousness.  Not compounding his windfall with greater lucre would be regarded as a wasteful, and Mr. Fisher would be consigned to that outer darkness, complete with ambient weeping and gnashing of teeth.

State Contracts with PragerU

Oklahoma's state superintendent of schools, Ryan Walters, has generated a lot of controversy.  Prior to becoming superintendent this year, Mr. Walters was appointed Secretary of Education by Governor Stitt.  In May, 2022, federal auditors found that a program Mr. Walters administered had few safeguards to prevent fraud, and they opened an investigation into the distribution of COVID relief funds under Mr. Walters' tenure.  That same month, Oklahoma newspapers reported that Mr. Walters was continuing in his role as Executive Director of a non-profit funded by national school privatization advocates and charter school expansion advocates.  Mr. Walters was paid a salary of $120,000 in his position with that non-profit, while his state salary was only $40,000. 

He stepped down from his position at the non-profit upon taking up his office as  superintendent in January 2023.  The Oklahoma Ethics Commission fined him for fourteen violations of state campaign ethics rules in connection with the election that got him there.  The Oklahoma legislature refused to act on his nomination for a second term as Secretary of Education after the Oklahoma Attorney General told lawmakers that it was illegal for Mr. Walters to hold both positions simultaneously.  

In office, Mr. Walters crossed swords with the Attorney General again, when he attempted to revoke the licenses of teachers who spoke out against new laws that regulate the ways that the subjects of race and gender can be taught in public schools.  He expressed views on the Tulsa Race Massacre that earned him a parody article in The Onion.  Most recently, he threatened to remove accreditation from Tulsa Public Schools, and the Tulsa superintendent resigned in protest, a move that Mr. Walters cheered, calling it a tremendous day for Tulsa parents.  The school board did not agree.  According to this report from local news channel, KTUL, one board member explained the decision to accept the Tulsa superintendent's resignation as follows, "We're devastated as a board but we're going to do what's best for students we have to move forward."

Now, as Chris Casteel reports in The Oklahoman, taking his cues from Florida, Mr. Walters has announced a "partnership" with PragerU Kids.  PragerU's videos are provided for free, so it's not clear why a "partnership" is called for.  Nor is it clear why the state would promote videos from a company whose content has been restricted, demonetized, or flagged by YouTube because they contained misinformation.  In 2018, a U.S. District Court dismissed PragerU's suit against YouTube, a ruling that was upheld by the 9th Circuit on appeal.  

PragerU is a non-profit organization that announces its goal as countering "the dominant left-wing ideology in culture, media, and education."  Prager U is funded by conservative donors whose views on education are closely aligned with the views of those who paid Mr. Walters's salary when he was executive director of a non-profit.   PragerU calls itself "the world’s leading conservative nonprofit that is focused on changing minds."  

This is the politics of shamelessness.  Accusing those on the left of surreptitiously doing what conservatives do openly permits politicians to boast of their adoption of shameful measures.  Students deserve to be provided with the best education we can offer them.  They should be provided with the full picture of the American experience, rather than one sanitized to promote a shallow patriotism fueled by ignorance of the diversity and the complexity of our shared history.  If "culture, media, and education" are dominated by "left-wing views," perhaps it is because it is impossible to study U.S. history without realizing that the views of history associated with the left arose organically in response to politics and a society that have not always been consistent with the story that PragerU wants to promote about U.S. history.  

As Lenzy Krehbiel-Burton and Andrea Eger report in The Tulsa World, schools have no plans to supplement their curricula with PragerU materials.  According to the Oklahoma Department of Education, which has added links to PragerU to its website, the "partnership" is limited to placing those links on the state website and will not have a financial cost to the state.  As so often in the culture wars, this is a lot of sound and fury over not very much because you really cannot force people to adopt the views of a small minority, no matter how vocal or how overrepresented they are in state politics.  Still, there is a cost to the state.  It's just not a financial cost.

College Football Coach Fired for Failure to Comply with the Clery Act

Kienus Perez Boulware (Boulware) was employed by the Winston-Salem State University (WSSU) since 2010.  In 2016, he entered into a four-year contract as head coach.  Among his "other duties . . . as may be assigned," Boulware served as a Campus Security Authority, tasked with assisting WSSU in complying with its duties under the Clery Act, which requires universities to track and report crimes. 

In April 2019, two football players got into a fight on the field.  They then fought in the locker room.  They were sent home to their dorms, where they continued to fight.  The father of one of the football players told Mr. Boulware that there might have been a gun involved.  Mr. Boulware went to the dorm room, discovered what was likely marijuana, but did not search for a gun after the players denied that there was one.  

A few weeks later, the school began proceedings to terminate Mr. Boulware for cause.  He had not notified campus police or any other authorities, despite a situation that clearly posed a potential threat to security on campus.  He thus violated his duties as a Campus Security Authority.  Mr. Boulware exhausted his on-campus avenues of review and then appealed his termination in state court.

In July, in Boulware v. University of North Carolina Board of Governors, the North Carolina Court of Appeals sided with WSSU and ruled that his termination was valid.  WSSU had correctly interpreted the Clery Act and had stated multiple grounds for terminating Mr. Boulware and had been asserting those grounds consistently throughout the proceedings.  

Texas Supreme Court Addresses State Sovereign Immunity and Construction Contracts

In 2014, Texas Southern University (TSU) executed a contract with Pepper-Lawson/Horizon International Group (PLH)  on a project to construct student housing.  The contract required  completion by August 31, 2015, subject to justified time extensions and equitable price adjustments for certain types of delays.   PLH did not complete the project until February 2016, and then invoiced TSU for $7 million, $3.3 million due under the contract and plus $3.7 million for “additional direct costs” PLH had allegedly incurred due to “excusable delays.” 

TSU refused to pay, and PLH sued.  Both the facts and the interplay of contracts provisions involve multiple complexities.  The issue on appeal was whether sovereign immunity barred the suit.   

Although PLH’s pleadings expressly invoked the immunity waiver in Section 114.003 of the Texas Civil Practice and Remedies Code, TSU made a jurisdictional argument, asserting Section 114.003 was inapplicable because PLH failed to plead a claim covered by the waiver provision.  TSU claimed that (1) PLH failed to plead facts showing “breach of an express provision of the contract”; (2) PLH failed to point to a contractual provision expressly allowing recovery of damages for owner-caused delays or attorney’s fees; and that remaining claims were moot.  As a result, PLH was not entitled to enhanced interest or attorney's fees.  

The trial court rejected TSU's arguments, but the Texas court of appeals, reversed on an interlocutory appeal.  In Pepper Lawson Horizon International Group LLC v. Texas Southern University, the Supreme Court of Texas, without hearing or oral argument, found that the court of appeals erred.  The issue was not whether the contract unambiguously established a waiver of sovereign immunity but whether the statute did so.  PLH had adequately alleged that it did, and it adequately alleged a breach of contract entitling it to damages.  Plaintiffs need not prove their case on a jurisdictional challenge.  They only have to make allegations sufficient to establish jurisdiction.

The case was remanded to proceed to the merits.

The State Secrets Privilege, Contracts, Potential Fraud, and the First Circuit

Last week, I taught a one-week "premester" course on the state secrets privilege (SSP).  I taught it last year, and my libertarian students are all delighted as their communitarian professor gives them new reasons to distrust the government.  This year, we featured a guest appearance (via video conference) by the incomparable Dean Bobby Chesney as a special treat for our closing session.

We start with contracts material -- the Totten doctrine, a post-Civil War case which provides that allegations that the government breached a secret agreement are non-justiciable.  The parties must know when they enter the contract that, with respect to it, their lips are "forever sealed."  Forever?  Over a century later courts were still applying Totten even to agreements with saboteurs.  Seems like sabotage does not stay secret long if you're doing it right.  Whatever.  

We then move on to the SSP proper, which is an evidentiary privilege first recognized in United States v. Reynolds (1953).  There, the Supreme Court recognized a privilege belonging only the the government.  It excuses the government from its discovery obligations when disclosure of the material sought through discovery would pose a risk to national security.  In Reynolds, plaintiffs' decedents were civilian engineers killed in the crash of an Air Force B-29.   They sought a report on an investigation conducted by the Air Force.  The Air Force withheld the report, asserting the SSP (tardily, but whatever).  Without looking at the report (but whatever), which did not contain the sort of national security secrets the government claimed it did, SCOTUS upheld the SSP, and the case settled.  Decades later, when the report was declassified and relatives discovered that the government had misled the courts as to the contents of the report, they brought a coram nobis claim, which the Third Circuit rejected.  Even if the report contained nothing about the flight's secret mission, the Russkies might have learned from the report that B-29s fly in the air at a certain altitude.  Claim denied.  Whatever. 

If the case cannot proceed without the material subject to the privilege, the case must be dismissed.  More alarmingly, if the government cannot defend itself without being able to introduce evidence subject to the SSP, the case must be dismissed.  More alarmingly still, if a plaintiff seeks recovery from a private contractor, the government may intervene and assert the privilege and shut down the case, sometimes even on a pre-Answer motion to dismiss.  One such case made me so mad, I set aside my research agenda during a sabbatical and wrote a rage-fueled 90-page manuscript.  The SSP marches on notwithstanding.

In Sakab Suadi Holding Co. v. Aljabri, we go a step further.  I did not include this case in my course, and once I try to summarize the facts, I think you will understand why.  Sakab Saudi Holding Company (Sakab) is a Saudi government entity.  It alleged that Mr. Aljabri and his associates (collectively Aljabri) defrauded it of billions of dollars.  It seems that Mr. Aljabri was an agent of Saudi Arabia's former Crown Prince Mohammed bin Nayef, who has removed form office in 2017 and has been in detention since 2020.  In 2017 there arose a new Crown Prince over Saudi Arabia, which knew not Aljabri.  Litigation followed.

Sakab first brought suit in Canada where Aljabri resides, and where the agreeable Canadians froze Aljabri's assets worldwide and appointed a receiver for certain assets.  Sakab then filed a complaint in Massachusetts state court seeking to give effect to the Canadian order in the US.  Big mistake.

Aljabri had the case moved to federal court.  Once there, he had his own story to tell.  He too operated as a Saudi official, and he lawfully used the funds he received from Sakab to engage in counterterrorism activities in partnership with the U.S. government. 

To make a long story short, the U.S. government intervened, asserted the privilege, and shut down the U.S. litigation.  It did not do so by demanding that the litigation come to a halt.  Rather, it submitted in camera classified affidavits indicating that the U.S. government's interests would be endangered were Aljabri to seek to introduce evidence relating to "certain categories of information."  The courts could not say much more about the nature of these affidavits without disclosing the very information they government was trying to protect.  

Even thought the government did not ask for dismissal, that is what it got.  Both the district court and the First Circuit concluded that there was no way for the case to proceed without the materials subject to the SSP, nor could the court grant Sakab any of the preliminary relief it requested.  

To sum up: Sakab and Aljabri had a contractual relationship that may have involved transfers of billions of dollars.  We don't know what Aljabri did for Sakab, but it seems to have related to Saudi counterterrorism efforts, which seem to have been coordinated with U.S. national security agencies.  The U.S. government does not want any information relating to Mr. Aljabri and Sakab's joint activities to be disclosed in U.S. court proceedings because such disclosures would do harm to U.S. foreign relations -- in particular, the threatened harm is to the U.S. relationship with Saudi Arabia, one presumes.  But it was a a Saudi entity that initiated the litigation.  Seems to me that a sovereign state ought not to have its covert operations kept secret while also initiating litigation relating to those covert operations.  And so, perhaps no harm done if Sakab can get no relief in U.S. courts because of the SSP.  

Sometimes the secrets the government tries to protect through the SSP come out in foreign litigation.  We'll see how the courts in Ontario proceed.

Supreme Court Strikes Another Blow Against Prosecuting Corruption in the Buffalo Billions Case

Inspired by Will Baude and Dan Epps' Divided Argument podcast, we wrote about a pending SCOTUS case Ciminelli v. United States last November.  Now, thanks are due to Leah Littman, Melissa Murray, and Kate Shaw, and the Strict Scrutiny Podcast's "You Can Crime if You Want To" episode, for reminding me of the case and alerting me to the two opinions that SCOTUS has now issued.

Justice Thomas (left) wrote for the Court in Ciminelli v. United States.  As we noted in our prior post, the operative legal theory at the District Court and in the Second Circuit was the so-called "right of control," a property-based fraud theory that permits conviction where the defendant through wire fraud (18 U. S. C. §1343) deprives victims of valuable economic information necessary to make discretionary decisions.  The Court unanimously rejected the "right of control" theory as a basis for criminal liability under 18 U. S. C. §1343.

That's too bad, because the opinion outlines what clearly seems to be a criminal conspiracy to rig government contracts by using businesses as front companies so as to direct very large construction contracts to politically-connected insiders.  The Court based its ruling on the statutory text as well as prior case law in which the Court held that the statute does not create a general federal power to police integrity or punish deception.  The crime must involve money or property and not intangible interests such as "honest services."   

You don't need a Weatherman to know that the winds at SCOTUS are blowing in the direction of tighter scrutiny of white-collar criminal convictions, and so the government abandoned the "right of control" theory in its briefing.  Rather, the government tried to persuade the court that there was sufficient evidence in the record to sustain the conviction on a more traditional theft-of-money-or-property theory.  The Court remanded the case to let an actual jury make that determination.  Justice Alito filed a concurring opinion in which he hinted that, if he were on the jury, he knows what he would find . . . .

Justice Alito wrote for the Court in Percoco v. United States, except that Justice Jackson did not join Part II-C-2.  That part is a bit substantive chunk of the opinion, so I am not sure what it means for her to concur except for that part.  Criminal law.  Sheesh.

Joseph Percoco was convicted of mail and wire fraud for having deprived the public of its intangible right to honest services.  The Court noticed in Ciminelli that intangible offenses such as "honest services" violations cannot provide a basis for conviction under 18 U.S.C. § 1843, but Percoco was convicted under 18 U.S.C. § 1846, which Congress enacted in response to a SCOTUS decision and which specifically encompasses a "scheme or artifice to deprive another of the intangible right of honest services.”

Percoco was a close associate of Governor Cuomo.  During a brief time when he was not an official state employee, but was still an informal advisor to the Governor and was employed by the Governor's campaign, he took $35,000 to operate as a political fixer.  On appeal, he argued that an honest services violation can only occur when the defendant is a public official.  The Court rejected that argument as too sweeping.  Nonetheless, the Court found that the jury instructions in Percoco's case were incorrect.  As in Ciminelli, the government did not defend those instructions but argued that the error was harmless.  Unsurprisingly, the Court disagreed and remanded the case for further proceedings consistent with the opinion.  The instructions on what constitutes an honest services violation were too vague.  The Court did not indicate whether the government's alternative grounds for upholding the conviction could provide a basis for a conviction if actually presented to a jury, nor did it provide clear guidance on what instructions would survive its vagueness analysis.

Justice Gorsuch, joined by Justice Thomas, concurred but would go one step further.  As currently written, 18 U.S.C. § 1836 does not provide private citizens with adequate notice of what constitutes a violation.  The Justices could put their heads together, Justice Gorsuch confidently predicts, and draft a better version of the statute, but that is not their job.  The Court "should decline further invitations to invent rather than interpret this law."  And anyway, the Court's invention workshop is already working overtime on new wrinkles to the major questions doctrine, the history-and-tradition approach to the Fourteenth Amendment, the alternative to Smith in the Free Exercise context, a new version of the dormant commerce clause, and a version of standing flexible enough to allow pro-life doctors with no connection to mifepristone to challenge 20+-year-old FDA rulings.

But I digress.

The Magic Kingdom Pulls a Sleight-of-Hand on Governor DeSantis

For over a year, Governor Ron DeSantis of Florida (left) has been trying to curb the independence of the state's top employer, The Disney Company. Because of a special agreement between Disney and the state, Disney governs its 25,000 acre theme park as though it were a county, according to Brooks Barnes writing in The New York Times.  But Disney came into conflict with Governor DeSantis over an education reform known by its opponents as the "Don't Say Gay Law."  Disney and Orlando have quietly become a haven for LGBTQ+ people, as David Smith reported last year in The Guardian.  Governor DeSantis hoped to retaliate against Disney for its opposition to the new law by terminating Disney's power over its special tax district.

But things did not go as planned.  If the special task district were abolished, the costs of maintaining it would have to be absorbed by neighboring counties, and the district was carrying $1 billion in debt.  So, the legislature passed a new plan in February.  Disney would retain control over the special tax district but its five-member board would now consist entirely of appointees named by the Governor.   Among others, Governor DeSantis appointed Ron Peri, chief executive of a Christian ministry in Orlando and adherent of the theory that tap water turns people gay.  

Now that's just silly.  Everyone knows that tap water only turns frogs gay.  

But Disney had a countermove.  As Brooks Barnes reports, on February 8th, the old board "passed restrictive covenants and a development agreement giving the company vast control over future construction in the district; the new board doesn’t have any say."  You can view the document on the Orlando Sentinel's website here. Disney complied with all requirements  for open public meetings under Florida's Sunshine Laws.  Nonetheless, the board's actions seems to have passed unnoticed, perhaps because the Governor's attention is focused more on his Presidential campaign than on governing his state, or simply because state officials underestimated the ingenuity of private ordering.  The covenants “[s]hall continue in effect until twenty one (21) years after the death of the last survivor of the descendants of King Charles III, King of England living as of the date of this declaration.” 

I checked in with my next-door neighbor, property prof, Carla Spivack, who assures me that the above-quoted language is consistent with the Rule Against Perpetuities.  Disney is clearly no Mickey-Mouse operations.  They hired actual lawyers to do this work, and the lawyers apparently decided to have some fun with it.  

Behold the power of private legislation to fend off some pretty aggressive public legislation. 

Somehow, I'm thinking this ain't over.

Texas AG Ken Paxton Seeks to Scuttle Settlement With Whistleblowers

Image by Gage Skidmore

While I was in Texas for KCON, I came across this news article from James Barragán in The Texas Tribune.  In short, Texas Attorney General Ken Paxton (right) agreed to a $3.3 million settlement with eight whistleblowers who worked with him and were terminated or resigned after accusing him of corruption and abuse of office.  They agreed to pause their suit against General Paxton so that a payment of the settlement could be arranged. 

General Paxton now thinks the pause should to continue indefinitely, and plaintiffs have had to return to court to ask the court to allow the case to proceed.  The Texas legislature is refusing to approve the payment, and Paxton is now arguing that the whistleblowers, having agreed to a settlement that cannot be implemented, should walk away with nothing.  If the legislative session that ends on May 29th awards them nothing, they can wait, General Paxton avers in a legal filing, until the next legislative session . . . in 2025 and then 2027, and so on.

It seems an important commentary on our time that the incredibly powerful Attorney General of our second-most populous state should engage in corruption atop corruption and it doesn't even merit national news.  My quick Google search turned up no reporting on the issue in the national press.  General Paxton boasts on his website that he brought suit against the Obama Administration 27 times in two years.  Sixteen months into the Biden Presidency, General Paxton had already brought 25 challenges to that administration's policies.  It is hard to keep straight all of the cases that the U.S. Supreme Court has heard in the past few years that are captioned Texas v. United States.  And yet, news of significant corruption and abuse of legal process by a politician with a national impact merits little more than a shrug and a sigh.  I spoke with some friends from Texas about the story, but they could not disentangle this story about corrupt politicians from all the others and responded with hopeless resignation.

The settlement agreement included a provision for an apology from Paxton to his former subordinates.  There are no reports that General Paxton has issued the apology.  The Texas Legislature apparently has no interest in using taxpayer dollars to pay for a settlement that would resolve General Paxton's legal problems in this case.  People interested in learning about the other legal fixes for which General Paxton has never been held accountable, including two indictments for securities fraud which somehow, after seven years, still have not gone to trial, can read about them in the Texas Monthly.  

The Texas Montly also provides a litany of complaints about the inefficacy of General Paxton's office in fulfilling its primary mission -- addressing crime in Texas.  That's as may well be, but from this blog's perspective, there's just one legal delict that matters: breach of contract.

Sid DeLong, The Rainmaker's Case

The Rainmaker’s Case
(and the Aleatory Contingency Fee Scam)

Sidney W. DeLong

When lawyers hear the word “rainmaker,” they think of a partner in a law firm who makes his money by attracting high-paying clients to the firm. He often assigns their legal work to his partners and associates, whose work earns the firm’s income. But don’t feel sorry for them: a good rainmaker can be worth his weight in gold to his partners, whose net earnings would dwindle without him.

The term “rainmaker” in such a case is metaphorical, referring to tribal magicians who are believed to produce rain by propitiating the gods. The recent devastating floods in drought-stricken California reminded me that “rainmaker” used to have a more literal meaning. A little over a century ago, while California was enduring yet another prolonged drought, an enterprising sewing machine salesman named Charles Mallory Hatfield invented what he claimed was a new, scientific method of making rain. Hatfield sold his services as a “pluviculturist” to several California municipalities under a series of contingency fee contracts in which he would be paid only for producing rain in agreed-upon amounts. The following version of his story can be found here.

In 1915, Hatfield entered a contract with the city of San Diego to produce enough rain to fill the nearby Morena Dam Reservoir. Under the terms of the deal, Hatfield would be paid $1,000 per inch of rain produced between 40 and 50 total inches. He would receive nothing for rain up to 40 inches, which the parties apparently assumed would fall without artificial assistance. He also would receive nothing for rain above 50 inches, which was apparently all that the city needed. The contract provided that the $10,000 fee was payable only when the reservoir was filled.

Hatfield put his mechanism into action and on January 5,1915 it began raining. And raining. And raining. Thirty inches fell in January alone. The rain not only filled the reservoir but caused devastating flooding, which broke a dam and caused millions of dollars in damage. “Hatfield’s Flood” ultimately claimed 50 lives. Pleas to Hatfield to call off the rain were ignored because he was helpless to do so. Instead of calling it off, he doubled-down, promising to provide yet more rain!

Après le deluge, Hatfield confidently claimed his $10,000 fee. The city of San Diego contested the claim. The city denied liability on the oral contract on several grounds. It also counterclaimed against Hatfield for $3.5 million in damages resulting from the flood.

These offsetting tort and contract claims created a perfect legal stalemate. The city could not lose: Either Hatfield was a fraud and did nothing to earn his fee (the rain having fallen without his assistance) or else he did cause the rain and so was liable in tort for the resultant flood damage as an intentional or negligent trespass. Hatfield likewise could not lose: either he earned the fee or else he was not liable because he did not cause the flood. Because neither party could lose, neither could win. The court reportedly held that the rain was an Act of God (not an Act of Hatfield), and so denied both the contract claim and the tort counterclaim. The only rainmakers to make money from the case were the lawyers.

The Rainmaker’s Case resonates with the dark folklore of contract, myths rooted in fears of rash promises and unintended consequences. One trope involves the consequences of breach of a promise to pay for supernatural services. Compare the people of San Diego with the citizens of Hamlin, who made a deal with the Pied Piper to pay for the extermination of the plague of rats. When they refused to pay as promised, he spirited away their children. When the city refused to pay as it had promised, Hatfield punished their breach of contract with more deadly rain.

Or perhaps Hatfield suffered the fate of the Goethe’s Sorcerer’s Apprentice, a role played by Mickey Mouse in the 1940 Disney movie Fantasia. Left to manage the sorcerer’s workshop while his master was away, Mickey wielded magic that he did not understand in order to get his water-carrying chores done by an animated broom, He found himself unable to utter the magic spell that would stop an army of implacable, bucket-carrying brooms from flooding his master’s workshop. The master returned just in time to regain control and the apprentice was duly chastened. Perhaps like Mickey Mouse, Hatfield learned the risks of tampering with the elemental forces of nature. When you mess with Mother Nature, always have a safe word.

Moving from myth to more mundane matters, the Rainmaker’s deal illustrates one of the oldest cons in the book, what I call the Aleatory Contingent Fee Scam. It works like this: Suppose someone approaches you in a casino and, recognizing that you are a novice, makes you the following offer: “I will give you guaranteed roulette wheel betting advice for a fee: If you lose a bet following my advice, you pay me nothing. If you win, you pay me 10% of your winnings.” Hatfield offered rainmaking services to San Diego on exactly the same basis. The city got his services for free if it didn’t rain, while he got paid up to $10,000 if it did.

I trust the reader can see that it would be foolish to agree to pay an aleatory contingency fee on the basis of a chance event. The key to the scam is that the payee cannot influence the contingency and simply rides along on the payor’s good fortune when it occurs.

The reader may be inclined to think that no rational person would agree to an Aleatory Contingency Fee Scam. The reader would be wrong. Consider corporate executive compensation contracts that reward CEO’s with vast bonuses payable on the contingency of stock price movements that the CEO’s may have had little or no hand in influencing. If it doesn’t’ rain, they get nothing. But if it rains, they get rich; and the corporation takes a bath.

Universities in New Jersey Are Immune from COVID Suits

This one starts out like many other cases we have covered in which students sue their universities for switching to remote learning in March 2020.  Plaintiffs in Mueller v. Kean University, students at New Jersey universities, sued alleging breach of contract, unjust enrichment, conversion, or money had and received.  Plaintiffs sought to recover part of the tuition and fees they paid on the ground that the education they received did not conform to their expectations. 

However, this case goes differently because of New Jersey's Emergency Health Powers Act (EHPA). which rendered the universities immune to suit because they acted in compliance with the New Jersey governor's executive orders relating to the COVID pandemic.  The governor issued a series of executive orders between March 16th and 21st that ordered all institutions of higher learning within the state to cease in-person operations.  

Kean University conceded that the online education it provided to students during the Spring 2020 semester was "inherently different" from in-person learning and that it charged more for in-person education than for online programs.  Nonetheless, it refunded only room and board fees but not tuition or other fees, claiming that the EPHA rendered it immune to suit.  The trial court agreed. 

Montclair State University argued both that it was immune to suit and that it had not breached any contractual obligations, having found a way to continue offering educational services to students through online programs.  Here too, the trial court dismissed the complaint based on immunity under the EPHA.  

On appeal, plaintiffs argued that the EPHA immunizes the universities only with respect to liability for "injuries," suggesting that they cannot be sued in tort but that contracts claims may proceed.  The court rejected this argument, noting that the EPHA exempts entities for harms to "property" and defines property to included, among other things, money.  As a result, the court concluded, the EPHA also immunizes the universities against contracts claims.  No action by the universities suggested that they had waived their immunity.

Finally, plaintiffs argued that giving effect to the EPHA in this way violates the constitutional prohibition on state impairments of contracts.  But that constitutional provision has been construed to permit state adjustment of contracts pursuant to the state's general welfare powers.  Plaintiffs did not argue that either the executive orders at issue or the universities' decisions to shut down were unreasonable or unnecessary, and so they did not meet the standard for a contracts clause challenge.